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Purchase consideration payable

Chandrakumar.k (STUDENT) (77 Points)

17 March 2014

Dear Team,

Please clarify me the following question:

Purchase consideration payable in amalgamation:

why the Business purchase a/c dr and To Liquidator of Transferor company cr???

could you please help me the rules behind this..

Thanks in advance!

Warm Regard,

Chan

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6 Replies

Manish Sabnani (none) (21 Points)
Replied 18 March 2014

In this acc. Entry.. We make the liquidator of company as creditor and the business purchased would be considered as a kind of asset... Therefore the business purchased a/c dr. ( DEBIT WHAT COMES IN) ., To liquidator of company..(PC payable. , CREDITOR/ LIABILITY) will be the entry...

CA Saroj Kumar (Keen to learn something new every moments) (2588 Points)
Replied 18 March 2014

I think quite different from u guys...

My thinking is of like that ...bcs when amalgamation procedure is taking place all trasaction is going through liquidator it self which is either appointed by Court or Tranfeor company. The liquidator is works on behlaf transferor company. Hence when we purchasing business of transferor company.

we doing simply

Business A/c Dr

To Liquidator of Transferor com. A/c

(Being business purchased/acquired)

It means we acquired business and correspondingly created liabilitty for that in the name of liquidator. However u may not follow this entry in such a case u may directly put accouting entry for Debit all assets acquired and credit with all liablity along with liablity for purchase consideration is required to be created.

and 'on payment to liquidator we doing

Liquidator of transferor company A/c

To Eqty. shre A/c

To Pref. Share A/c

To Cash A/c.

(Being the purchase consideration paid.)

1 Like

Chandrakumar.k (STUDENT) (77 Points)
Replied 19 March 2014

Thank very much for your response. I got it.

Chandrakumar.k (STUDENT) (77 Points)
Replied 19 March 2014

I have one more question.. Please let me know why we are using prefix "To" along with particulares in debit side and "by" in credit side while posting Ledger. What is the concept behind this??? Thanks in advance

CA Saroj Kumar (Keen to learn something new every moments) (2588 Points)
Replied 20 March 2014

these two words are basically used to establish relationship between two accounts.

suppose in Cash Ledger u r potting

To Interest A/c

It means by using TO u r just making relation between Interest and Cash. Similarly for BY

Chandrakumar.k (STUDENT) (77 Points)
Replied 20 March 2014

Thank you very much for your response, Saroj Ji. Yes. I understood. But, apart from that, is there any other concept?? such as, "To" represents giving to anyone and "By" represents receiving from anyone. If so, please tell me what?? Thanks in advance.